Dear Priya,
I am writing to provide you with an updated fee projection for our representation of Torchlight Mining Corporation ("TMC") in connection with the Department of Justice antitrust investigation referenced above, and to request your formal approval of the anticipated budget overage.
As you will recall, our engagement letter dated February 18, 2022, established an initial budget estimate of USD 12 million for Calderwood & Harkness's fees and disbursements through the internal investigation and grand jury defense phase, as further detailed in the Matter Budget and Staffing Plan we circulated on February 25, 2022. Since that time, the matter has expanded significantly in scope due to a number of developments that were not fully anticipated at the outset of the engagement. I want to be transparent about where things stand and ensure we have your written authorization before continuing beyond the original estimate.
**Drivers of the Budget Overage**
The cost escalation is attributable to three principal factors:
*1. Expanded Internal Investigation*
The internal investigation grew substantially beyond initial projections. Our document review ultimately encompassed approximately 487,000 documents — roughly 3.2 million pages on a cumulative basis — through the first subpoena response alone. We conducted interviews of 23 current and former TMC employees. Most significantly, the VaultChat message analysis required substantial additional attorney time. As you know, the recovered encrypted communications involving Gavin Holt revealed at least 37 documented exchanges with counterparts at Ridgecrest and Pinnacle between March 2017 and July 2021, all of which required careful review, categorization, and analysis by senior members of our team.
In addition, preparation of the Board presentation of internal investigation findings (delivered January 20, 2023) and the cooperation proffer submission to DOJ (submitted February 15, 2023) each required extensive preparation and multiple rounds of revision.
*2. Expert and Vendor Retention*
Two vendor-related developments have contributed to costs beyond the original estimate:
- **Hargrove Forensic Advisory LLC.** Dr. Vanessa Tremblay and her team were retained on July 1, 2022, to conduct economic analysis of pricing patterns and to assess affected-commerce volume. Hargrove's fees to date and projected through matter close are approximately USD 1.85 million. This engagement was not contemplated in the original USD 12 million estimate, which covered only C&H fees and Redstone e-discovery costs.
- **Redstone Digital Forensics Inc.** Neil Ashworth's team has performed well, but fees are tracking at approximately USD 2.3 million through projected matter close, somewhat above initial projections due to the volume of data collected across 34 custodians and multiple data sources.
*3. Anticipated Second Subpoena and Continued DOJ Engagement*
Based on our recent discussions with Trial Attorneys Denise Kowalski and Marcus Reeves, we anticipate that DOJ will issue a second subpoena requesting additional pricing data, which will require further document collection, review, and production. Additionally, the proffer sessions for Sandra Chu and Thomas Eriksen — which we anticipate will be scheduled during Q1–Q2 2023 — will require significant witness preparation and attendance by senior attorneys. Ongoing DOJ negotiations, including our cooperation submissions and potential non-prosecution agreement ("NPA") discussions, will require sustained partner-level time over the coming months.
**Revised Fee Projection**
Our revised projection of total Calderwood & Harkness fees and disbursements through anticipated matter close is approximately **USD 18.7 million**, representing an approximately 56% increase over the initial USD 12 million estimate. This figure reflects our standard billing rates as set forth in the engagement letter (Partners at USD 1,450/hr, Senior Associates at USD 950/hr, Associates at USD 725/hr) and includes all anticipated C&H professional fees and direct disbursements through the conclusion of the DOJ engagement.
In addition, the following vendor costs are being billed through or coordinated by our firm:
| Vendor
Regarding Meridian — as we discussed, if TMC elects to retain a compliance consultant in connection with a potential compliance-remediation program (which may be advisable depending on the trajectory of NPA discussions), additional costs will follow. We do not yet have a firm estimate, as Meridian has not been formally engaged, but I will provide projections as soon as the scope of any such engagement is defined.
Taking all of the above into account, the **combined projected professional fees across C&H and all vendors could reach approximately USD 23–24 million** through matter close, depending on the trajectory of DOJ negotiations and whether additional expert or consulting support is required.
**Factors Supporting the Revised Budget**
I want to briefly address the key factors that, in our view, make the revised projection both reasonable and consistent with the demands of the matter:
- The receipt of the DOJ target letter on May 20, 2022, materially changed the posture and risk profile of the engagement, requiring more intensive defense strategy work and a thorough cooperation analysis that was not originally scoped.
- Gavin Holt's refusal to cooperate with our internal investigation — on advice of his personal counsel, Patrick Dunleavy at Briarcliff Law Group PLLC — and his subsequent assertion of Fifth Amendment privilege before the grand jury on June 14, 2022, required us to pursue alternative investigative avenues, which increased attorney hours considerably.
- The sheer volume of the first subpoena response (approximately 487,000 documents, all subject to privilege review) and the anticipated second subpoena have driven e-discovery and review costs well beyond original estimates.
- The Board's decision on January 20, 2023, to pursue a cooperation strategy and potential NPA — which we recommended and continue to believe represents the best path forward for TMC — requires sustained, high-level engagement with DOJ that will extend both the timeline and the cost of the representation.
**Request for Formal Approval**
In light of the foregoing, I respectfully request that you provide written confirmation that TMC approves the revised budget projection of approximately USD 18.7 million for Calderwood & Harkness fees and disbursements, acknowledging that this represents an overage beyond the initial USD 12 million estimate set forth in our engagement letter. A reply to this email confirming TMC's approval is sufficient for our purposes.
We will continue to provide monthly invoices with detailed time and expense reporting, and I will promptly flag any further material changes in the projection as the matter develops. Detailed billing summaries broken down by phase are available upon request if that would be helpful for your records or for internal reporting purposes.
If TMC's management team or the Audit Committee would benefit from a more detailed walkthrough of the budget, I am happy to schedule a call with you, Søren, and Richard at your convenience.
**Closing**
Priya, thank you for your continued partnership and responsiveness throughout this engagement. I recognize that the budget increase is significant, and I want to assure you that we are managing staffing and workflow carefully to ensure efficiency. The matter is progressing well — our cooperation proffer has been submitted, and we are cautiously optimistic about the path toward a favorable resolution for TMC. I look forward to continuing to work with you on this.
Please do not hesitate to reach out with any questions.
Best regards,
**Howard Bellamy** Partner, Antitrust & Competition Practice Group Calderwood & Harkness LLP One Liberty Plaza, 50th Floor New York, NY 10006 T: (212) 555-4180 E: hbellamy@calderwoodharkness.com
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